Ads coming soon on your cellphone

LAS VEGAS — On the Internet, banner ads, pop-ups and other advertising elements are common. On the mobile phone, it is uncharted territory.

But announcements made at CTIA Wireless 2006 this week hint that ads will start appearing shortly on phones to subsidize the information and entertainment people are paying for today.

CTIA Wireless is an annual event organized by the wireless association to discuss the future of the mobile industry. This year, the event in Las Vegas is expected to draw nearly 40,000 attendees.

Seattle-based Medio Systems plans to announce today that it has acquired Seattle-based WebRelevance, a company specializing in matching advertisements with content on Web pages.

Medio is taking WebRelevance's expertise on advertising on the Internet and applying it to the mobile industry. In doing so, Medio will allow companies to place ads related to the search request. For instance, if a person is searching for the band Red Hot Chile Peppers, one of the results could be a paid advertisement offering a Chile Peppers ringtone, said Medio Chief Executive Brian Lent.

On Wednesday, Bellevue-based Action Engine and Redmond-based MSNBC.com announced they have created a free application that users download to their phones to watch TV and view news. The application is free because it is subsidized by advertising. The ads are small banners that run across the top or bottom of the screen or commercials that play before TV clips.

The reason why advertisements are finally making into mobile is because the opportunity is too large to pass up.

"I've been waiting for this moment for a long time," said Will Hodgman, chief executive of M:Metrics, a Seattle mobile-research group,

To date, he said, "There's very little advertising. I'm mystified. The opportunity is bigger than Oprah's audience."

He estimates that more than 24 million people are accessing content through their mobile phone during a month, or more than the average Oprah Winfrey TV audience. Despite this, he said, very few mobile sites have ads.

The hesitation has been based on a fear that any additional information a user has to wade through on a small screen will be a turnoff. Additionally, since mobile phones charge extra for using data services, users would be essentially paying for the ads.

Still, Hodgman believes well-placed advertising will appear much like it does on the Internet today. Plus, he said the ads can be much more relevant to the user because mobile phones belong to a person unlike a computer that may be shared by multiple people. With mobile, there's much greater opportunity to present ads that match a user's taste.

"Mobile ads that are highly relevant to a user's search will be accepted," said Medio's Lent. "Users will see them as beneficial, much like they see them on the Internet."

Medio would not say how much it paid for WebRelevance, which has fewer than 10 employees. Brendan Benzing, the vice president of product management for InfoSpace, which is also building search platforms for the mobile phone, said being able to identify the mobile user is why it's a large opportunity.

"In mobile space, you don't take risks that the ad will speak to the user. It is better for the user to think of it as relevant information rather than an ad."

He said advertising on the mobile phone will still take awhile. For instance, a new search tool InfoSpace launched with T-Mobile USA this week does not incorporate ads. He said first a significant user base must be built to get the advertisers' attention and then carriers must sign off on the idea.

So far, carriers are being reluctant; there is concern that it could invade a user's privacy, said Denny Strigl, president and chief executive of Verizon Wireless, in an interview.

He said he will not allow advertising to be presented to his subscribers unless they agreed to it. "I want the choice to be yours, not ours."

Still, Benzing said advertising could hit phones in the second half of this year.

Lent said the market is ready now. "Every carrier is at different stages in what you consider an advertisement," he said.

Perhaps, ads will be text links in search results, or there will be a click-to-call feature. That's still being sorted out.

"I think it will grow, and I think in six months from now we will have a lot better view of that."